Multiple Bids Received For Toys “R” Us’ Asian Business

A lawyer representing Toys “R” Us has disclosed that multiple bids for the toys retailer worth more than $1 billion have been received for its Asian business. The bids for the 85% interest the American toys retailer has in its Asian unit. Per the lawyer who was speaking in bankruptcy court the offers would also include intellectual property. Additionally the lawyer also disclosed that Toys “R” Us was working on a deal aimed at selling its Central Europe operations.

Though Toys “R” Us has operations across the world, the toys retailer filed bankruptcy in the United States last year in September following intense competition from online retailers and worries over mounting debt. The toys retailer is now shutting down stores both in the United Kingdom and the United States. The operations of Toys “R” Us in Asia and Europe have however been described as healthy.

Debt added by PE firms

Prior to the financial woes in the United Kingdom and the United States Toys “R” Us owned around 1,600 retail outlets located in 38 countries. In 2005 investors who included private equity firms KKR and Bain Capital acquired Toys “R” Us and added debt amounting to $5 billion to the company. Part of the problem was that the interest payments were too high as in some years up to $400 million was used to service the debt.

Toys “R” Us had attempted to restructure but the efforts failed. Poor sales during the usually busy holiday season last year did not help matters and earlier in the year the toys retailer announced it would it would be shuttering its retail outlets in Puerto Rico and the United States. Additionally the UK operations of Toys “R” Us announced it would be closing its doors following an unsuccessful attempt to get a buyer for the 100 retail outlets it owns in the United Kingdom.

Brand name licensing

According to an administrator part of the reason why a buyer couldn’t be found in the United Kingdom was that the UK operations of Toys “R” Us are complex and a potential buyer would have found it difficult sorting things out. This includes getting the rights to use the name of Toys “R” Us since it owned by the parent firm based in the United States.

“In addition, there are many services provided within the group by different subsidiaries, so if you take over one part, you have to make alternative arrangements or negotiate new terms. Put all that together and becomes very complicated,” said Moorfields Advisory’s Simon Thomas.

Leave a Reply